New Delhi: Global crude oil prices are set to rise amid curtailment of supplies led by the reduction in Iran’s crude exports by around 1 million barrel per day (mbpd) due to US’ latest decision to end sanction waivers and also an ongoing disruption of 1.1 mbpd of Libyan oil output amid local unrest.

However, potential increase in OPEC+ crude supplies may mitigate the impact gradually, although with significantly curtailed global spare capacity.

“We expect global oil markets to tighten further in the near term due to full curtailment of Iran’s oil exports post the US decision to end sanction waivers granted to eight importing countries, once the exemptions period expires on May 2 and the possibility of disruptions in crude supplies from Libya given its escalating unrest,” Tarun Lakhotia, Associate Director at research firm Kotak Institutional Equities said.

He added that Iran’s crude exports of 1 mbpd may get fully curtailed in the coming months, as countries that currently import oil from Iran may not want to risk an imposition of sanctions by the US. Iran’s crude production is likely to fall to 1.8 mbpd, closer to the level of domestic consumption, from peak volumes of 3.8 mbpd in June 2018 and recent production of 2.7 mbpd in first quarter of 2019.

Global oil markets have already tightened in the recent months due to voluntary reduction in supplies by OPEC+ and Canada, and restraints on Venezuelan crude exports by the US. OPEC+ may ease production cuts in the near term, as indicated by the US, to mitigate the loss of Iranian crude. However, it will still reduce the available spare capacity in a tight market.

According to K Ravichandran, Senior Vice President at research and ratings agency ICRA, global oil prices could breach the $80 per barrel mark in the immediate aftermath of the US decision to end waivers. “1 mbpd (Iranian exports) is a sizeable reduction in supplies. While it can be offset by additional supply from OPEC+ it is coming at a time when there are ongoing disruptions in Libya and Nigeria,” he said.

He also said that India may not have to worry about supplies immediately as additional oil imports can be sourced from other nations including Saudi Arabia and Kuwait. “Some Indian companies are already importing oil from the US. It is possible to ramp up those volumes too,” Ravichandran said.

Meanwhile, global oil prices hovered near 2019 peaks in early trading on Tuesday after the US move to abruptly to end waivers by May. Brent crude futures were at $74.33 per barrel at 0051 GMT, up 0.4 percent from their last close and not far off 2019 highs of $74.52 reached on Monday.